Carriers United – a Look at Zoompass

Editors Note: Glenbrook, along with the rest of the payments industry, has been watching developments in mobile payments closely. A few weeks ago, our partner Carol Coye Benson profiled Boku and CashEdge products. Today, she takes a look at Canada’s Zoompass (below), Zong, Billing Revolution, and Blaze Mobile.[UPDATE Aug 6th: Be sure to check out Carol’s latest installment on Obopay, one of the original mobile payment pioneers.]

Zoompass is a carrier-centric service recently announced in Canada. The three major carriers there together formed a company (EnStream) to offer the service to their customers. At launch, this is positioned as a cash substitute in the person-to-person domain – a way to send money to someone else, knowing only their cell phone number. As a nice touch, Zoompass also includes a “request for money” feature. (I can only assume they have some kind of velocity monitoring to avoid cash harassment!) I interviewed Robin Dua, President at EnStream.

Funding is pure simplicity. You can link a credit card to the account, and use it to send money to any mobile subscriber on a participating network. The mechanics are similar to PayPal in the United States. Zoompass does a credit card transaction (where they are the merchant), and then a separate transaction, using the Canadian ACH, to credit the receiving customer’s bank account. Alternatively, a customer can fund a Zoompass stored value account from their bank account, using either a preauthorized ACH-type debit, or by using their online banking bill pay service: Zoompass is set up as a payee on all the major banks services. There is also an optional prepaid MasterCard available. Interestingly, the balance of this account is linked to your Zoompass balance, so if you have $100 in your Zoompass account, and then sign up for the prepaid MasterCard account, that prepaid card automatically has $100 on it.

If a consumer is sent money, and does not yet have a Zoompass account, they receive a text message and are asked to set up an account. Viral marketing at its purest!

The consumer is charged for sending money – a business model which we have previously noted has proven problematic, in the U.S., at any rate, for P2P payments. But simplicity and ubiquity (Zoompass covers 95% of Canadian cell phone subscribers) may create enough value to overcome this obstacle. Robin expects the model to continue, but the actual prices to change as they learn more about the market.

Robin thinks the opportunity is huge, simply because “people are mobile”. He sees the phone as a virtual appendage for many. All of their research also indicates that people want to do a lot more with their phone, including eliminating the need to carry cash. And, he notes, it is important to realize that many people are phone-centric rather than computer-centric – something that developers still working on online payments may be tempted to overlook.

I’m fascinated, of course, by the banking angle on this. When I recently lived in Canada, I was a big fan of the banks’ shared Interac debit network, and particularly the email money transfer service that let me effortlessly transfer money to someone else (I paid my son’s piano teacher this way), knowing only their email address. So why weren’t the banks able to convert this model to mobile? If any country can summon the collective energy of bankers to work together, it’s Canada – so what happened?

According to Robin, the most important issue is the phone software itself. To begin with, “it’s not easy” to develop software that works on a large set of target handsets – you need phone-savvy developers. The carrier relationship that EnStream has gives them access to handset technology, even before the introduction of the phone in the market. Furthermore, “we’ve done things that are proprietary – that only a carrier or someone owned by a carrier can do”. For example, Zoompass allows you to synchronize your contacts within the phone address book with the application. The application also detects if a phone number you are trying to send money to is a cell phone or not, because it has access to carrier databases. This allows them to create a more friendly user experience.

Although banks have been relegated to a behind-the-scenes role (as the passive recipient of ACH transactions), Robin is anxious to work with them, and partnering discussions have already begun. One possibility, of course, is that banks could offer this service to their customers, and integrate the transactions more smoothly into the mobile online banking experience.

Another potential next step would be to take the Zoompass wallet to the point of sale, again possibly with the cooperation of banks. This would be “the first step in a convergence of wallet and phone”. Dua notes that the carriers expect a few handsets to be NFC capable by the end of this year, with more following in 2010. He thinks the tipping point won’t occur until 2011. They are actively looking at bridging technologies, such as contactless card stickers and micro SD (which can enable the full NFC experience) to enable POS functionality before NFC chips are broadly available in phones.

Other potential expansion plans involve enabling digital content purchases, other sources of funding, and international licensing. They are in discussions with some carriers, including in the U.S., on this possibility.

At the end of our interview, Robin returned to the question of phone software. He thinks we are moving towards an environment where there will be fewer device platforms – probably four dominant platforms. Application developers will therefore find it easier to build something and get ubiquitous. The wallet application, from a payment instrument standpoint, will have to be open – that is, support multiple payments types and brands. But it looks like the Canadian carriers are clearly banking on the wallet itself being under their control, and being branded Zoompass.

One Response to “Carriers United – a Look at Zoompass”

Thank you for taking the time to interview Robin, and for taking such a thorough look at Zoompass.

We’re still in the beta launch phase right now, and we’re very keen to hear what people think of the service. In fact, we just asked that question today over on the Zoompass blog (http://bit.ly/4tWKEx). We’d love to hear everyone’s feedback.